Corporate leaders learn to meld ethics with profitability

To start their day, employees of Reaology Holdings open computers to a screen reminding them of the global real estate firm's ethical policies.

LAURA KLEPACKI

To start their day, employees of Reaology Holdings open computers to a screen reminding them of the global real estate firm's ethical policies.

Richard Smith, chairman and CEO, a keynote speaker at the fifth annual Rutgers Institute for Ethical Leadership conference on business ethics and sustainability in Newark, New Jersey, last weekend, said that a company's behavior starts at the top with management setting the tone.

Reaology employs 11,000 and engages with 260,000 independent real estate sales associates worldwide, including operations in all 50 states. Among its brands are Coldwell Banker, Century 21 and Better Homes & Gardens Real Estate, all three having a strong presence in the Poconos.

Smith said its policies guide behavior both externally and internally. In addition to meeting safety and environmental compliance standards, it addresses touchy topics like marital infidelity and use of offensive language. Reaology prosecutes if a legal wrongdoing is discovered, "in order to protect others," said Smith, who stressed that consistency in meting out punishment is key.

"As part of the company culture, there is a focus on people doing the right thing day in and day out," he said. Ethics are discussed during hiring interviews. Reaology also screens business partners to make sure they are a right fit. "To be successful, ethical standards need to be a high priority."

Smith said that ethical behavior isn't taught in school, and the company "continues to remind every day."

Terri Mickens, associate broker with Coldwell Banker Commercial in Stroudsburg, said her office is owned and operated independently but is an affiliate of Coldwell Banker Commercial & Reaology, and as such has access to all its corporate programs and tools.

"They are very careful about who they are in the arena both on financial strength and ethical and moral character," Mickens observed. "A watchful eye at all times."

Some may see Reaology's oversight of its employees' personal conduct as taking it to the extreme. However, the firm is emblematic of a global movement of companies to act and be seen as more ethical and socially responsible.

More than half of Fortune 500 companies now publish an annual report on their CSR (corporate social responsibility) initiatives, according to Christine Bader, a former BP oil executive turned author and lecturer. Her just-published book, "Evolution of a Corporate Idealist: When Girl Meets Oil" outlines her nine years at BP, where she struggled with the benefits of bringing economic growth to remote areas of the world and its safety and welfare impacts.

While at BP, Bader played a central role in the resettlement of 127 families when it built a gas extraction plant in Papua, Indonesia. During that time, a local leader was murdered, forcing BP to contemplate how it should respond. Immediately after, she was assigned to help with social programs associated with a joint venture petrochemical plant project in China that would bring 10,000 to 15,000 migrant workers into a town of 30,000.

During an early meeting, a Chinese construction manager ran down numbers from a spreadsheet outlining estimated costs and timeline for the massive project near Shanghai. Among the projections were eight worker deaths. "Our target was zero," said Bader, who recalled how her BP team argued with its counterparts to change the number and strive to meet it. "We managed not to kill anybody."

Along the way, Bader learned that in corporate social responsibility there were issues to pick and choose, and sometimes the countries with which one is working also have internal forces at odds with the project. Eventually, she left for a job with the United Nations to work on addressing human rights abuses linked to business. Her departure was prior to BP's notorious Gulf of Mexico disaster.

Being socially responsible doesn't have to be on a grand scale, but in ensuring day-to-day processes are fair, safe and environmentally friendly, according to several speakers.

Sanofi, the parent of Sanofi-Pasteur in Swiftwater, is among that Fortune 500 group that publishes a CRS report. Its program has three pillars: ethics, conducting business with integrity; people, focusing on its employee and communities where it operates; and planet, addressing ways to protect and preserve the environment.

Last year, Sanofi held its third annual CRS corporate convention. Thousands of employees have been trained in its code of ethics.

Rutgers Professor Kevin Lyons, an expert in supply chain issues — that is, any process that gets a product or service from its origins to its final destination — said employee conditions is a topic that repeatedly comes up in his work.

"Companies are in business to make money, but how are the people (workers) being treated," he asks. "Are they paid a living wage?"

Meanwhile, Alfa Demmellash, co-founder and CEO of Rising Tide, a microbusiness development organization in Jersey City, New Jersey, has been helping fledgling neighborhood entrepreneurs get the business skills they need to succeed. Think of it as the educational and technical complement to microfinancing.

Her clients, Demmellash said, "are not necessarily in it just for the money, but for a higher purpose."

Jersey City is like the tale of two cities — one side gleaming with new buildings and finance firms, and the other struggling, according to Demmellash.

Paula Luff, vice president, corporate social responsibility for the Hess Corp., acknowledged that there are different rates of ethical performance around the world. "As a global company, we are often operating in shades of gray."

For example, a company could be in partnership with a supplier not meeting international standards. Abandoning the supplier cold will leave many workers without necessary materials. Instead, a company may take a longer term, paternalistic approach to try to improve conditions.

"The role of business in society has changed," said Luff, noting companies are taking on more responsibility for security and human rights. "We need to look at the business model through a social lens. It is not just about shareholder value, but stakeholder value and social value."

Bader, stressing that everyone needs to play a role, believes the matter of corporate responsibility is urgent. "This is a matter of life and death," declared Bader to conference attendees. "We are here because we have a job to do."